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W W W. D I N S L A W. C O M The W W W. D I N S L A W. C O M The Recovery Audit Contractor Program & Medicare Appeal Process October 2, 2009 Thomas W. Hess, Esq. 191 W. Nationwide Blvd. , Suite 300 Columbus, Ohio 43215 Phone: (614) 227 -4260 | Fax: (614) 2218590 Email: [email protected] com

Introduction: Section 302 Tax Relief and Health Care Act of 2006: n n Congress Introduction: Section 302 Tax Relief and Health Care Act of 2006: n n Congress creates the permanent version of the RAC Program Private companies selected by CMS will be paid on a contingency-fee basis to identify and correct improper payments made under Parts A and B of Medicare © 2009 Dinsmore & Shohl LLP

Introduction: October 6, 2008: CMS Names Four New RACs n CGI Technologies and Solutions, Introduction: October 6, 2008: CMS Names Four New RACs n CGI Technologies and Solutions, Inc. (Region B: Ohio, Kentucky, Indiana, Michigan, other Midwestern states) n Diversified Collection Services, Inc. (Region A: Pennsylvania, Northeast) n Connolly Consulting Associates, Inc. (Region C: West Virginia, and other Southern states) n Health. Data. Insights, Inc. (Region D: West Coast, Upper Plains) Map of RAC Jurisdictions: http: //www. cms. hhs. gov/RAC/Downloads/Four%20 RAC%20 Jurisdictions. pdf © 2009 Dinsmore & Shohl LLP

Introduction: CGI Technologies and Solutions, Inc. n Website: www. cgi. com n CGI Press Introduction: CGI Technologies and Solutions, Inc. n Website: www. cgi. com n CGI Press Release, 10/14/08: CGI believes there is “potential for significant revenue” from contingency fees n CGI Corporate Information: – – provides information technology and business process services – n large publicly-traded multinational corporation with 27, 000 employees and 100 offices in 16 countries annual revenue 3. 8 billion CGI’s Ohio Contact Information: – Helpline: (877) 316 -7222 | Email: [email protected] com © 2009 Dinsmore & Shohl LLP

Introduction: What is the Current Status? n A bid contest in late 2008 caused Introduction: What is the Current Status? n A bid contest in late 2008 caused a brief delay, but efforts to fully implement the RAC Program are now moving forward n Ohio: RAC Program is operational as of October 15, 2009. © 2009 Dinsmore & Shohl LLP

Introduction: Presentation Goals: 1. Build your understanding of the RAC Program; 2. Provide suggestions Introduction: Presentation Goals: 1. Build your understanding of the RAC Program; 2. Provide suggestions to prepare your organization; and, 3. Discuss strategies for minimizing the short and long-term effect of the RAC Program ($$$). © 2009 Dinsmore & Shohl LLP

Background: It’s About Minimizing Improper Payments: CMS is vocal about its focus on minimizing Background: It’s About Minimizing Improper Payments: CMS is vocal about its focus on minimizing improper payments. The common types of improper payments involve services that: – lack medical necessity – are improperly coded – lack sufficient documentation. Two important questions: reasonable? Was the site appropriate, necessary and reasonable? Was the service appropriate, necessary and The Government Accountability Office published a report estimating that some $10. 8 billion in improper payments were made through Medicare in 2007. © 2009 Dinsmore & Shohl LLP

Background: Goals of the RAC Demonstration: – use third-party companies – pay contingency fees Background: Goals of the RAC Demonstration: – use third-party companies – pay contingency fees to those companies for identifying and correcting improper payments (overpayments and underpayments) The RAC Demonstration Program (the “RAC Demonstration”): Congress created the Demonstration under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Where the RAC Demonstration Occurred: CMS selected three RACs that reviewed fee-for-service claims in California, Florida, and New York over a three-year period. © 2009 Dinsmore & Shohl LLP

Background: The Evaluation of the RAC Demonstration: June 2008 n The RACs corrected $1. Background: The Evaluation of the RAC Demonstration: June 2008 n The RACs corrected $1. 03 billion in improper payments 96% of improper payments identified and collected were overpayments from providers, while just 4% were underpayments repaid to providers. n n 22. 5% of overpayment determinations were appealed 7. 6% of overpayment determinations were overturned on appeal. n The Most Prominent Target: © 2009 Dinsmore & Shohl LLP

Understanding the RAC Program: Basic Structure Purpose: Like the RAC Demonstration, the permanent RAC Understanding the RAC Program: Basic Structure Purpose: Like the RAC Demonstration, the permanent RAC Program is aimed at protecting the Medicare Trust Fund by identifying and correcting improper payments made under Parts A and B of Medicare. – Recent Updates from CMS: http: //www. cms. hhs. gov/RAC/03_Recent. Updates. asp#Top. Of. Pa ge © 2009 Dinsmore & Shohl LLP

Understanding the RAC Program: Identifying and Returning Underpayments Automated & Complex Reviews: RACs will Understanding the RAC Program: Identifying and Returning Underpayments Automated & Complex Reviews: RACs will use automated and complex reviews of medical records to identify Medicare underpayments. Any underpayment findings on claims will be communicated to the affiliated contractor. You Will Receive a Letter and Get Paid: The affiliated contractor will validate the RAC’s underpayment finding through the RAC Validation Contractor. Once validated, an “Underpayment Notification Letter” will be sent to the provider. The relevant contractor will adjust the claim and be responsible for paying the provider. If there is also a corresponding overpayment determination, those amounts will offset the underpayment © 2009 Dinsmore & Shohl LLP adjustment.

Understanding the RAC Program: Identifying and Collecting Overpayments Automated and Complex Reviews: RACs will Understanding the RAC Program: Identifying and Collecting Overpayments Automated and Complex Reviews: RACs will also use automated and complex reviews of medical records to identify Medicare overpayments. Limited Scope of Review: CMS has excluded several potential sources of improper payments from RAC scrutiny, including: – programs other than Medicare Fee-For-Service (e. g. , Medicare Managed Care program) – the cost report settlement process – mis-coding Evaluation and Management services. Overpayment Determinations Documented and Validated: When RACs identify an overpayment, the rationale will be documented, with references to Medicare rules and policies. Those determinations are then put through a validation process with the © 2009 Dinsmore & Shohl LLP RAC Validation Contractor.

Understanding the RAC Program: Identifying and Collecting Overpayments RACs Will Seek to Collect Overpayments: Understanding the RAC Program: Identifying and Collecting Overpayments RACs Will Seek to Collect Overpayments: Once identified and validated, the RAC will seek to correct the overpayment. Notice / Demand: Part A providers will receive a “written notification. ” Part B providers will receive a “demand letter. ” Full or Partial Denial: The letter will detail whethere is a full or partial denial. Reporting: Suspected fraud or quality issues will be reported. Normal Collection Mechanisms: The overpayment amounts will likely be collected through recoupment vis-à-vis present or future Medicare payments. Other recovery mechanisms will also be available (e. g. , twelve month installment plans, referral to United States Treasury for collection, etc. ). Collection is a crucial component of the RACs' work because the recovery of overpayments is a prerequisite to the receipt of contingency payments. © 2009 Dinsmore & Shohl LLP

Understanding the RAC Program: The Coverage/Coding Reviews Automated Reviews Used to Identify Clear Errors: Understanding the RAC Program: The Coverage/Coding Reviews Automated Reviews Used to Identify Clear Errors: Automated reviews are allowed in circumstances when it is "certain" that payment for services is improper. Example : An Oncology Practice performs a particular medical service over a 7 month period to patients with a particular medical condition. The Oncology Practice was unaware that one-year ago, a new National Coverage Determination (“NCD”) was published with respect to such treatments. The NCD affirmatively states that the medical services provided by the Oncology Practice are never reasonable and necessary for that condition. Because it is “certain” that Medicare’s payment for those medical services is improper, the RAC can utilize data mining techniques © 2009 Dinsmore & Shohl LLP to discover that type of billing error.

Understanding the RAC Program: The Coverage/Coding Reviews Complex Medical Reviews Used When Improper Payments Understanding the RAC Program: The Coverage/Coding Reviews Complex Medical Reviews Used When Improper Payments Likely: Complex Medical Reviews are allowed when there is a “high probability, ” rather than a certainty, that the services billed are not covered. Procedure for Medical Records Requests: : Complex medical review involves the inspection of medical records. There are two ways that RACs can request medical records: onsite review or by written request. Keep the following in mind: – RACs are sometimes required to pay for obtaining medical records – If a provider refuses access to medical records during an onsite review, the RAC is not allowed to make an overpayment determination on that basis. Instead, the RAC must request the records in writing, at which point the provider must respond in 45 days. At that point, if the provider fails to respond, the RAC can then make an overpayment determination. RACs are subject to medical record request limits: http: //www. cms. hhs. gov/RAC/Downloads/RAC%20 Medical%20 Record%20 Request% 20 Limits. pdf To ease the burden of such requests, CMS permits providers to securely transmit records via electronic means (e. g. , CDs) – – © 2009 Dinsmore & Shohl LLP

Understanding the RAC Program: Other Structural Nuances Extrapolation: RACs may extrapolate their findings to Understanding the RAC Program: Other Structural Nuances Extrapolation: RACs may extrapolate their findings to determine the overpayment amount. q Section 935 of the MMA Referrals / Tips: RACs may receive and consider referrals or tips regarding potential overpayments, but they are under no obligation to conduct a review. RAC Data Warehouse: To prevent duplicate reviews, RACs will submit selected provider and claim data to a web-based application called the RAC Data Warehouse. If a claim has already been reviewed, it will be deemed "excluded. " If the provider or claim is part of an ongoing fraud investigation, that provider or claim will be deemed "suppressed. " Before conducting a review, RACs will use the RAC Data Warehouse to ensure the target of the review is not excluded or suppressed. RACs Lack Settlement Authority: RACs will not have any authority to compromise or settle overpayment debts. Providers are still permitted to make settlement offers, but the RACs will simply forward those offers to CMS, along with a recommendation. CMS will © 2009 Dinsmore & Shohl LLP the offered settlement is in its best interest. then determine whether

Understanding the RAC Program: A Potential Cause for Concern RAC Clinical Judgments RACs must Understanding the RAC Program: A Potential Cause for Concern RAC Clinical Judgments RACs must follow Medicare policies. RACs will also be staffed by a physician medical director and certified coders. RACs will have the authority to use medical literature and clinical judgment to deny claims in the absence of a national or local policy. Providers should be prepared to exercise their Medicare appeal rights in order to challenge such judgments when appropriate. © 2009 Dinsmore & Shohl LLP

Engaging the Medicare Appeals Process The 5 -Step Appeals Process: Step 1: Redetermination (Fiscal Engaging the Medicare Appeals Process The 5 -Step Appeals Process: Step 1: Redetermination (Fiscal Intermediary, Carrier, MAC) Step 2: Reconsideration (Qualified Independent Contractor) Step 3: Administrative Judge Hearing (Administrative Law Judge) Step 4: Administrative Council Review (Medicare Appeals Council) Step 5: Judicial Review (U. S. Federal District Court) Note: It appears as though providers will also have access to an a “rebuttal process” that will precede the appeals process. Providers may be able to respond directly to a RAC within 15 days of an overpayment determination. This may be an excellent tool for providers that somehow failed to respond © 2009 Dinsmore & Shohl LLP to a RAC letter requesting medical records.

Engaging the Medicare Appeals Process Step 1: Redetermination Timing: 30 Days avoids recoupment | Engaging the Medicare Appeals Process Step 1: Redetermination Timing: 30 Days avoids recoupment | 120 Days is the final deadline to submit request for redetermination, absent good cause Interest: Begins to accrue 31 days from the overpayment letter Request Filed With: Fiscal Intermediary or Carrier, and soon, MACs Content: HIC Claim Number; Services and Dates of Service at Issue; Reasons for Disagreement with Overpayment Determination; Evidentiary Support Redetermination Conducted By New Person : Someone new at the FI or Carrier or MAC will conduct the redetermination by reviewing the initial findings and evidence, as well as new and additional evidence presented by the provider Timing of Decision: 60 Days Nature of the Decision: Favorable, Partially Favorable, Unfavorable © 2009 Dinsmore & Shohl LLP

Engaging the Medicare Appeals Process Step 2: Reconsideration Timing: 60 Days avoids recoupment | Engaging the Medicare Appeals Process Step 2: Reconsideration Timing: 60 Days avoids recoupment | 180 days from Partially Favorable or Unfavorable Redetermination Filed With: Qualified Independent Contractor Content: All evidence relevant to issues in dispute, the disagreement with the result of the initial overpayment determination, and redetermination explained Medical Necessity Issues: If the medical necessity of an item or service is at issue, reconsideration will involve a panel of physicians or other health care professionals that make decisions based on clinical experience, medical records, and other scientific evidence Physician Services Issue: If the medical necessity of physician services is at issue, a physician must be involved in the reconsideration, but that physician does not have to be in the same specialty © 2009 Dinsmore & Shohl LLP

Engaging the Medicare Appeals Process Step 2: Reconsideration (cont. ) Timing: of Decision: 60 Engaging the Medicare Appeals Process Step 2: Reconsideration (cont. ) Timing: of Decision: 60 days Nature of the Decision: Written notice detailing a reversal or affirmance of the initial determination in whole or in part © 2009 Dinsmore & Shohl LLP

Engaging the Medicare Appeals Process Step 3: Administrative Law Judge Appeal Timing: 60 days Engaging the Medicare Appeals Process Step 3: Administrative Law Judge Appeal Timing: 60 days from QIC decision Amount In Controversy Minimum: at least $120. 00 New Evidence: No new evidence is introduced at this level of appeal Hearing Election: A hearing can be requested or waived so that an ALJ can make a decision based on the paper record Location: There are four HHS offices that handle such hearings, but the use of telephone or video conferencing is more likely CMS / Contractors: These organizations can decide to participate in a hearing Notice of Hearing: Sent 20 days before it is scheduled to occur Decision in 90 Days: The ALJ will issue a written decision with findings of fact, conclusions of law, and reasoning for the decision © 2009 Dinsmore & Shohl LLP

Engaging the Medicare Appeals Process Step 4: Medicare Appeals Council Timing: Appeal filed within Engaging the Medicare Appeals Process Step 4: Medicare Appeals Council Timing: Appeal filed within 60 days of ALJ decision Decision to Review: The Council will deny or grant a request for review The Review: The Council will either issue a decision itself or send the case back to the ALJ for further action Standard for Review: n abuse of discretion n error of law n ALJ findings or conclusions are not supported by substantial evidence n There is a policy or procedural issues affecting the public interest n New and material evidence © 2009 Dinsmore & Shohl LLP

Engaging the Medicare Appeals Process Step 5: Review by Federal U. S. District Court Engaging the Medicare Appeals Process Step 5: Review by Federal U. S. District Court Timing: 60 days from MAC decision Amount-In-Controversy Minimum: $1, 180. 00 © 2009 Dinsmore & Shohl LLP

Audit Defenses n Provider Without Fault n Waiver of Liability n Treating Physician’s Rule Audit Defenses n Provider Without Fault n Waiver of Liability n Treating Physician’s Rule n Challenges to Statistics n Reopening Regulations © 2009 Dinsmore & Shohl LLP

Audit Defenses – Provider Without Fault n Section 1870 of the Social Security Act Audit Defenses – Provider Without Fault n Section 1870 of the Social Security Act n Once an overpayment is identified, payment will be made to a provider if the provider was without “fault” with regard to billing for and accepting payment for disputed services © 2009 Dinsmore & Shohl LLP

Audit Defenses – Waiver of Liability n Section 1879(a) of the Social Security Act Audit Defenses – Waiver of Liability n Section 1879(a) of the Social Security Act n Under waiver of liability, even if a service is determined to be not reasonable and necessary, payment may be rendered if the provider or supplier did not know, and could not reasonably have been expected to know, that payment would not be made. © 2009 Dinsmore & Shohl LLP

Audit Defenses – Treating Physician Rule n – The treating physician rule, as adopted Audit Defenses – Treating Physician Rule n – The treating physician rule, as adopted by some courts, reflects that the treating physician’s determination that a service is medically necessary is binding unless contradicted by substantial evidence, and is entitled to some extra weight, even if contradicted by substantial evidence, because the treating physician is inherently more familiar with the patient’s medical condition than a retrospective reviewer. © 2009 Dinsmore & Shohl LLP

Audit Defenses – Provider Without Fault CMS Ruling 93 -1: With respect to Part Audit Defenses – Provider Without Fault CMS Ruling 93 -1: With respect to Part A Claims – CMS Rule 93 -1 states that treating physician opinion is evidence, but not presumptive, so need to make a case specific argument why physician’s opinion is the best evidence. n – No similar CMS rulings with respect to Parts B, C, or D n 42 C. F. R. § 482. 30: Conditions of Participation: Utilization Review n Provider should always argue that the opinion of the treating physician is the best evidence. © 2009 Dinsmore & Shohl LLP

Audit Defenses – Challenges to Statistics n Section 935 of the MMS n The Audit Defenses – Challenges to Statistics n Section 935 of the MMS n The guidelines for conducting statistical extrapolations are set forth in the Medicare Program Integrity Manual (CMS Pub. 100 -08), Chapter 3, §§ 3. 10. 1 through 3. 10. 11. 2 © 2009 Dinsmore & Shohl LLP

Audit Defenses – Reopening Regulations 42 C. F. R. § 405. 980 n – Audit Defenses – Reopening Regulations 42 C. F. R. § 405. 980 n – See MAC decision of n Critical Care of North Jacksonville v. First Coast Service Options, Inc. n In re Providence St. Joseph Medical Center v. United Government Services, LLC n In re Memorial Hospital of Long Beach v. PRG Schultz – See also Complaint in Palomar Medical Center v. Department of Health and Human Services, No. 09 -CV-0605 BEN NLS (S. D. Cal. Mar. 24, 2009). – Note also ALJ decisions permitting challenge of good cause for reopening © 2009 Dinsmore & Shohl LLP

Engaging the Medicare Appeals Process Things To Do: 1. Objectively determine whether the overpayment Engaging the Medicare Appeals Process Things To Do: 1. Objectively determine whether the overpayment determination was improper; 2. Assess the current / future reimbursement dollars at risk by performing internal audits and take corrective action when necessary; 3. Ascertain the cost of engaging the appeals process, broken down by stage; 4. Investigate and find whether evidentiary support exists; 5. Research whether any primary or secondary sources of reimbursement law or Medicare reimbursement policy help or harm your position (e. g. , regulations, National Coverage Determinations, Local Coverage Determinations, articles, etc. ); and, 6. Determine whether any fraud or other illegal conduct occurred. © 2009 Dinsmore & Shohl LLP

Engaging the Medicare Appeals Process Things to Avoid: 1. Engaging the appeals process when Engaging the Medicare Appeals Process Things to Avoid: 1. Engaging the appeals process when its more intelligent and cheaper to pay immediately and avoid interest; 2. Missing time deadlines; 3. Providing little or no evidentiary support; 4. Providing limited analysis; and, 5. Failing to fix identified problems going forward. © 2009 Dinsmore & Shohl LLP

Understanding the RAC Program: New Improvements New Aspects to the Permanent RAC Program: RACs Understanding the RAC Program: New Improvements New Aspects to the Permanent RAC Program: RACs must hire a physician medical director and certified coders n RACs must pay back any contingency fees arising from determinations that are overturned on appeal n The look-back period for reviews was reduced from 4 years to 3 years n The maximum look-back date is October 1, 2007. n A new web-based program will allow providers to track the status of medical record reviews. n © 2009 Dinsmore & Shohl LLP

Preparing Your Organization: #1: Create a RAC Coordinator/Team Appoint a RAC Coordinator or RAC Preparing Your Organization: #1: Create a RAC Coordinator/Team Appoint a RAC Coordinator or RAC Team to facilitate organizational preparation for the RAC Program. Once the RAC Program is implemented, the same individual or group can also keep tabs on reviews, corrective actions, and appeal deadlines. © 2009 Dinsmore & Shohl LLP

Preparing Your Organization: #2: Perform Internal Risk Assessments Perform an internal risk assessment to Preparing Your Organization: #2: Perform Internal Risk Assessments Perform an internal risk assessment to detect problem areas. The assessment should focus on detecting coverage and coding issues, with special emphasis on the problems identified during the RAC Demonstration. © 2009 Dinsmore & Shohl LLP

Preparing Your Organization: #2: Perform Internal Risk Assessments Errors Identified in the RAC Demonstration Preparing Your Organization: #2: Perform Internal Risk Assessments Errors Identified in the RAC Demonstration Provider Type: Inpatient Hospital Top Error: Top Services With Overpayments: Medically unnecessary service or setting (62%) Surgical procedures in wrong setting (medically unnecessary) DRG Change Due to Wrong Diagnosis Code or Principal Assignment (14%) Excisional debridement (incorrectly coded) DRG Change Due to Wrong Procedure Code(s) (11%) Cardiac defibrillator implant in wrong setting (medically unnecessary) All Other Inpatient Overpayments (11%) Treatment for heart failure and shock in wrong setting (medically unnecessary) Incorrect Discharge Status (1%) Respiratory system diagnosis with ventilator support (incorrectly coded) Errors Identified by the Office of Inspector General and Comprehensive Error Rate Testing Program http: //www. cms. hhs. gov/CERT/ © 2009 Dinsmore & Shohl LLP

Preparing Your Organization: #2: Perform Internal Risk Assessments On a going forward basis, providers Preparing Your Organization: #2: Perform Internal Risk Assessments On a going forward basis, providers should also use the "Internal Guidelines" that are to be published by each RAC. The Internal Guidelines will not change any Medicare policy, but will allow providers in each region to better understand what information will be reviewed and what results can be anticipated from a RAC. © 2009 Dinsmore & Shohl LLP

Preparing Your Organization: #3: Take Corrective Action Now Should the internal risk assessment reveal Preparing Your Organization: #3: Take Corrective Action Now Should the internal risk assessment reveal any problem areas, take corrective action to ensure an adequate resolution. Corrective actions may involve the development or revision of internal policies or the training of key personnel. © 2009 Dinsmore & Shohl LLP

Preparing Your Organization #4: Participate in RAC Outreach and Other Educational Opportunities Maintain familiarity Preparing Your Organization #4: Participate in RAC Outreach and Other Educational Opportunities Maintain familiarity with and participate in RAC provider outreach and professional educational opportunities. Much of the initial outreach will occur be through state professional associations. An excellent website to stay current is maintained by the American Hospital Association: http: //www. aha. org/aha/issues/RAC. © 2009 Dinsmore & Shohl LLP

Preparing Your Organization #5: Provide Feedback to CMS Participate in any opportunity to provide Preparing Your Organization #5: Provide Feedback to CMS Participate in any opportunity to provide feedback. CMS has already indicated that it will regularly use provider surveys. © 2009 Dinsmore & Shohl LLP

Preparing Your Organization #6: Seek Legal Counsel as Needed Consult with legal counsel if Preparing Your Organization #6: Seek Legal Counsel as Needed Consult with legal counsel if serious issues are identified in the risk assessment or upon receipt of a written notification or demand letter from a RAC. © 2009 Dinsmore & Shohl LLP

Some Final Positive Thoughts 1. The changes made between the RAC Demonstration to the Some Final Positive Thoughts 1. The changes made between the RAC Demonstration to the new permanent RAC Program were provider friendly. 2. CMS has reiterated that RACs will not be able to make overpayment determinations for minor omissions (e. g. , missing dates or signatures). 3. There is a hidden competitive edge for those providers that build an understanding of the RAC Program as it takes shape, follow the internal guidelines for their region’s RAC, learn how to intelligently maneuver the appeals system, and minimize short-term risk through risk assessments and long-term risks through effective corrective actions. 4. To at least some extent, RACs will be constrained by CMS, and will have a financial incentive to seek the easiest and most obvious errors. The economics of the program seem to dictate that more obscure issues and closer calls in terms of medical necessity will force RACs to think twice, largely because successful appeals mean the RAC will not get paid. © 2009 Dinsmore & Shohl LLP

THANK YOU! © 2009 Dinsmore & Shohl LLP THANK YOU! © 2009 Dinsmore & Shohl LLP

W W W. D I N S L A W. C O M Thomas W W W. D I N S L A W. C O M Thomas W. Hess, Esq. 191 W. Nationwide Blvd. , Suite 300 Columbus, Ohio 43215 Phone: (614) 227 -4260 | Fax: (614) 221 -8590 Email: [email protected] com